unpacking sip 16 stefan ramel, guildhall chambers daisy brown, guildhall chambers wednesday 11...
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UNPACKING SIP 16
Stefan Ramel, Guildhall Chambers
Daisy Brown, Guildhall Chambers
Wednesday 11 February 2009
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What’s all the fuss about?
• Finch “PPA: Bargains in the Shadow of Insolvency
or Shadowy Bargains” [2006] JBL• Walton “PPA: Trick or Treat?” (2006) 19 Ins Int 113• Bloom & Harris “PPA – what should be done
given the current disquiet?” (2006) 19 Ins Int 122• Moulton “The uncomfortable edge of propriety –
pre-packs or just stitch-ups?” Recovery Aut 05, p 2• Flynn “PPA – a regulatory perspective” Recovery Sum 06, p.3• Davies “PP – he who pays the piper calls the tune” p.16• Lockerbie & Godfrey “PPA – the legal framework” p.21• Goldring “A perfect murder?” Recovery Sum 08, p.34
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“pre-pack”
n. “an arrangement under which the
sale of all or part of a company’s
business or assets is negotiated with
a purchaser prior to the appointment
of an administrator, and the
administrator effects the sale
Immediately on, or shortly after,
his appointment.” : SIP16, para.1
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SIP 16 – A Summary
- Be mindful of duties to unsecured creditors (para 2,3,6,7)
- Keep a detailed record of your decision (para 2)
- Clarify role and relationships from outset (para 5)
- Provide creditors with detailed explanation and justification (para 8) to include specified information of which the administrator is aware (para 9)
- Hold initial creditors meeting asap after appt (para 11).
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The cornerstones of SIP 16
• The creditors must be provided with “a detailed explanation and justification” (SIP 16, para. 8).
• Para. 9 identifies information which “should be disclosed to creditors” in all pre-packs.
• Administrator must disclose information “of which he is aware after making appropriate enquiries” (SIP
16, para. 9).
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Disclosure Requirements in Summary
• Source of Administrators initial introduction / Extent
of Administrators prior relationship;
• Did the Administrator market the business? What valuations did he obtain?
• What alternative options did the Administrator consider? Could the administrator have traded the business? What funding requests were made?
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Disclosure Requirements in Summary
• Were the major creditors consulted?
• What assets did the Administrator sell? What consideration did he receive? Are there any adverse terms in the sale contract?
• Identity of purchaser / Connections between purchaser and oldco? Same directors / shareholders?
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Likely Impact of SIP 16 Para 9
What will be the impact of SIP 16, para. 9? Will it:
• lead to greater uniformity?
• measurably increase administration costs?
• erode value for creditors?
• increase the likelihood of challenges to administrators?
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“Exceptional Circumstances” (para. 10)
• Onus is on the administrator to establish why para. 9
disclosure has not been complied with.
• What does “exceptional circumstances” mean in this context? Out of the ordinary, special or uncommon.
• “Considerations of commercial confidentiality”
• Statutory exceptions
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Challenges
• Invalid appointment• Administration application• Choice of administrator• Directions application• Injunction• Unfair harm• Misfeasance application• Remuneration• Professional complaint
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UNPACKING SIP 16
Stefan Ramel, Guildhall Chambers
Daisy Brown, Guildhall Chambers
Wednesday 11 February 2009